Bridging the divide
In a difficult year for Latin America equity capital markets, BTG Pactual delivered for clients by providing global investor access supported by local know-how. For executing benchmark equity raises for large global corporations as well as critical financings for domestic companies, the bank is IFR’s Latin America Equity House of the Year.
Despite outperformance of equity benchmarks, Latin America ECM languished in 2023 as companies proved reluctant sellers and investors unconvinced of the turnaround, reducing issuance to need-based financing.
BTG Pactual figured prominently in that recapitalisation as a bookrunner on 23 of the 32 equity offerings completed in the year and US$1.9bn of league table credit, a 21.7% share of the US$8.6bn of transactions across the region, according to LSEG data.
Against a backdrop that saw Brazil’s benchmark Bovespa surge 22.3%, Brazilian companies accounted for more than three-quarters (76.5%) of issuance across the region but saw Mexico (22.5%) emerge as a centre of nearshoring for US companies. Overall volumes dropped by nearly one-third, a near decade low, and only four companies went public.
Brazilian stocks were in recovery as rates on the country’s 10-year Treasuries moderated to close the year at a still high 10.4% rate.
“When there is extreme volatility, markets depend more on local investors,” said Enrique Corredor, BTG’s head of LatAm ex-Brazil and international ECM.
In March, BTG earned outsized fees on the R$4.1bn (US$786m) sale in Brazilian retailer Sendas Distribuidora by troubled French parent Casino. The bank extensively pre-marketed the follow-on ahead of a three-day public roadshow, derisking what was the second-largest transaction completed during the year.
As lead-left coordinator, BTG placed half of the 254m Sendas’ shares priced at R$15 with Brazilian institutions and the other half with international investors. Investors were able to purchase either the local shares or the NYSE-listed American depositary receipts.
The extensive marketing effort allowed Sendas to communicate plans to expand its retail operations while growing online sales, as well as stronger corporate governance of a standalone company that included the disposal of Casino’s remaining 11.7% stake.
In June, just three months later, Casino returned with a R$2.1bn selldown of its remaining 157.6m Sendas shares at R$13.38 via a block sale executed overnight by BTG as sole bookrunner.
“As a Brazilian bank, we had a better idea of who would buy and who would not buy in the local market,” said Corredor.
BTG also helped Localiza build its profile on a R$4.5bn capital increase in June that the car rental provider used to acquire new vehicles, placing 40% of the offering with international investors. High investor demand allowed for the pricing of 67.5m Localiza shares at R$66.64, no discount to pre-launch levels and more than double the R$33 price at which Localiza previously sold stock in 2019.
BTG was rewarded with a greater share of incentive fees paid on the offering.
The R$5.2bn privatisation of utility Copel in August highlighted BTG’s ability to navigate a tricky situation. Despite flagging the selldown in May, three months later Copel was still negotiating terms of the concession agreement with the State of Parana, the selling shareholder.
“We had to pursue a bookbuild without knowing the minimum threshold price of the concession,” said BTG global ECM head Fabio Nazari, who oversees the bank’s Brazilian ECM activities.
Building on experiences from the similarly large privatisation of Eletrobras in 2022, BTG advised Copel to concentrate on a few large, long-only institutions. The anchor bookbuild allowed for pricing of 631.5m shares, more than one year of trading volume, at R$8.25, no file-to-offer discount and reducing state ownership to 27% from 70%.
Rival bankers will point out that BTG’s success is a function not only of local connectivity but local lending. They are not wrong, as large transactions for meatpacker BRF (R$5.4bn), environmental services provider Ambipar (R$717m), and retailer Grupo Casas Bahia (R$623m) were examples of companies seeking to tackle high-cost debt.
Yet BTG is uniquely positioned as a Brazilian bank that is pan-regional and increasingly international.
BTG was one of five bookrunners, and the only non-US foreign bank, on the Ps7.1bn (US$398m) follow-on by Mexican REIT Fibra Prologis in May. That offering saw international investors purchase 75% of the shares sold, providing a significant opportunity in the growth of nearshoring trends by US companies.
BTG was also the only non-US bank mandated as a bookrunner on the Fibra’s attempted spin-off of its industrial property unit, Fibra NEXT, which was delayed in December after local regulators failed to sign off on tax compliance. Mexican trucker Grupo Traxion and its Ps4.9bn all-primary follow-on offering in August is another play on nearshoring.
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